Inflation Hits Bank Of England Target

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The UK rate of inflation fell to 2% in December, a 0.1% drop from November.

Inflation, as measured by the Consumer Price Index, is now at the government's target of 2% for the first time since November 2009.

The Office for National Statistics said the drop was due to a reduced rate of increase in the price of food.

But inflation, measured by the Retail Prices Index, rose slightly in December, from 2.6% in November to 2.7% in December.

John Allan, National Chairman, Federation of Small Businesses, said:

“Inflation has been edging towards the two per cent level since last summer, which is welcome relief for hard-pressed households and businesses. With the economy now growing, our members will be pleased that pressures on the cost of doing business are easing, though some concerns over rising fuel and in particular energy costs remain.”

Jeremy Cook, chief economist at currency exchange specialists, World First, said:

“Inflation has been consistently sticky here in the UK since the ‘credit crunch’"

“This release will be good news for the Bank of England as they can breathe a tad easier about the risks posed by inflation towards their forward guidance plan."

The Governor of the Bank of England has said the Bank will not raise interest rates until the rate of unemployment hits his 7% target. The unemployment rate currently stands at 7.4%.

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